For a long time, decades, when the world thought of oil they thought of Saudi Arabia or the Middle East. That made sense. The Middle East that brought ultra-cheap oil to the world, and it’s colourful cast of characters enjoyed jerking the economic world around by running out onto their royal balconies and shouting ‘Oil prices must go up’ or ‘Oil prices must go down’ or ‘We’re still thinking but we are going to do something big and we’ll get back to you’. An ever-thirstier world, high on petroleum, was held captive by these OPEC declarations. Wars were fought to ensure access to oil. Brutal government regimes around the world were deposed or supported, depending on their position in the petroleum chess match.
Fast forward to today. The word ‘oil’ itself is incendiary, and a very odd character has bumped Saudi Arabia off its perch as the world’s most interesting petroleum state. For a number of reasons, Norway has become the epicentre of oil talk.
With a population of about 5 million, it is shocking how much of oil’s narrative centers on Norway. One of the biggest reasons is that the country is at the forefront of the ‘energy transition’, at least with respect to electric vehicles, and nothing captures the world’s attention like that topic. But Norway is also, if anyone reads the fine print, perhaps the best example of how challenging that transition is going to be.
The Norwegian elephant in the room, the point that no one can ignore, is that those 5 million citizens are wealthy beyond belief. You think Saudi Arabia is wealthy? Last year, Saudi Aramco borrowed money to pay the dividend to the state to keep the wheels turning. Norway has over a trillion dollars in its savings account. Saudi Arabia has 34 million citizens, Norway 5. Those Norwegian citizens own 1.4 percent of global stocks and shares through the national sovereign wealth fund.
When the Saudis were in a similar position decades ago, they looked at their pile of cash and thought, you know what we really need here is a solid gold toilet. After that, how about a diamond-encrusted Mercedes, and a thirty-foot high version of a Dodge Power Wagon that weighed 50 tons and has a four-bedroom apartment inside.
The Norwegians were slightly more modest; they looked at their money mountain and decided to go green.
Now, the optics of that move require some careful explanations and finely-tuned bravado. It is not easy explaining to the world’s poorer countries (i.e., all of them) that Norway is lighting the path for others on the green trail with that trillion dollars of oil money greasing the way. The managers of that sovereign wealth money periodically make dubious, vainglorious stabs at righteousness by informing the world that those petro-dollars will not be dirtied by investing in foreign petro-companies (despite the fact that Norway actively continues offshore oil exploration). Everyone looks at them like they farted at the dinner table, so they move on to the next best plan – the EV revolution.
In 2020, Norway boasted that “Electric cars rose to a 54 percent market share”, up from about 45 percent in 2019. Another article noted that “Electric vehicles could finally be reducing Norway’s oil consumption”.
Here’s the catch, though. That latter article, about EVs finally reducing Norway’s oil consumption, was from 2018, referencing 2017 data. Furthermore, the same article noted that April 2018 total petroleum consumption was 10.9 percent higher than April 2017, and pure auto consumption was 3 percent higher.
It is true that gasoline consumption has finally started falling. From 2017 to 2019, motor gasoline consumption fell by about 8 percent. But this is as the headline EV market share rose from 20 percent to 45 percent.
There are, of course, other factors at play. Norway’s population rose by about 2 percent 2017-2020, but road traffic volumes also decreased by just over 1 percent 2018-19. There is a whole master’s degree in the data involved.
From a high level though, one statistic seems worth focusing on: From 2017-2019, total sales of petroleum products decreased by only 3.3 percent, while EV market share more than doubled from 20 percent to 45. From 2015-2019, total sales of petroleum products decreased by about 6 percent, while EV market share nearly tripled.
Norway makes it very, very attractive to buy an EV. Cities and bigger towns offer free parking. Tolls are reduced by at least half, and sometimes more. EVs are exempt from both road taxes and a 25 percent European VAT. Company EVs receive substantial tax breaks. Norway has 9 percent of the total charging stations in Europe, despite making up only 0.7 percent of the population.
Further cementing Norway’s role as the undisputed heavyweight champion of the green world, 96 percent of Norway’s power comes from hydroelectric, and 98 percent is from renewables (the two percent jump is largely geothermal).
This whole show is the result of Norway being one of the richest nations in the world. Oil money underpins everything, and the government uses a firehose to spread it over green initiatives.
And still, despite all that, total petroleum consumption has fallen by only six percent from 2015 to 2019.
And that’s not all. Norwegians themselves are starting to say “enough”. Resistance to new on-shore wind power is so strong that one government consultancy sees no new onshore wind projects being built before 2034; another says no more will be built ever. Opposition comes from startling sources also: those lined up against more wind power include the Socialist Party, the Green Party, and the Liberals.
Since everyone loves holding Norway up as an example of the green path forward, let’s make sure and look at that whole picture. The challenge of reducing hydrocarbon consumption in any significant way is daunting beyond belief. You may hear otherwise, but when the wealthiest, most hydro-rich, green-mandated country can’t reduce consumption faster than this, no one else is going to either.
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Read more insightful analysis from Terry Etam here, or email Terry here.
